Treasury boost, lower NPAs have Union net jumping 73%

State-run Union Bank of India Friday reported a 73 percent jump in net profit at Rs 225 crore in the quarter to June, helped by higher treasury income and lower bad loan ratio. "Except for the divergence in the last quarter, which brought us down, our profitability has always been between Rs 100 and 200 crore. This time treasury did better so it helped in higher profitability," managing director Rajkiran Rai G told reporters.

In the previous quarter, the bank said the RBI had found out divergence in its NPA provisions worth Rs 27,324 crore for FY18 as against Rs 25,044 crore NPA provision reported by the bank. Treasury income grew 29.7 percent to Rs 345 crore.

However, net interest income declined to Rs 2,519 crore from Rs 2,626 crore as its net interest margin (domestic) slipped to 2.17 percent from 2.34 percent and global margins fell to 2.12 percent from 2.26. Rai expects the NIM to settle around 2.4 percent by March 2020.

Gross non-performing assets improved to 15.18 percent as against 16 percent, and so was NPA at 7.23 percent as against 8.70 percent. The lender is expecting GNPA to come down to 12 percent and net NPAs below 6 percent by March. Provision coverage ratio stood at 65.88 percent as against 56.49 percent.

Fresh slippages stood at Rs 3,090 crore, including Rs 860 crore from corporate book, Rs 1,050 crore from MSMEs, Rs 880 crore from agriculture sector and Rs 297 crore from the retail sector. Recoveries in the quarter came down to third at Rs 482 crore from Rs 1,252 crore in the same period last year. The lender has an exposure of Rs 26,000 crore to NCLT accounts.

"We are expecting some recovery from NCLT accounts. If it comes, our gross NPAs will come down by Rs 5,000 crore and cash recovery would be around Rs 3,300 crore," Rai said. Outside NCLT accounts, the lender is expecting a recovery of Rs 5,000-6,000 crore in this year.

The bank is looking at raising Rs 2,000-3,000 crore through QIP route and Rs 250 crore from sale of non-crore assets. Capital adequacy ratio of the Bank under Basel III stood at 11.43 percent as against 11.45 percent, compared to minimum regulatory requirement of 10.87 percent. Deposits grew from Rs 4,05,860 crore to Rs 4,30,014 crore, showing a growth of 5.9 percent. Advances increased 2.7 percent to Rs 3,06,889 crore from Rs 2,98,826 crore.

The Union Bank counter closed 1.30 percent down on BSE at Rs 64.70 as against a 0.3 percent gain on benchmark..